Xi Jinping can hold off on retirement planning for a few more years, now that China’s Communist Party has announced a proposal to eliminate a 10-year, two-term limit for China’s presidency. That sets up the powerful 64-year-old Xi to remain in office well into his golden years. He shouldn’t be the only one.
Set aside for a moment the question of whether China is wise to usher in one-man rule—a worrisome development that breaks with decades of institutional norms designed to prevent dangerous, Mao-like consolidations of power. The fact is that retirement age limits for other Chinese—some of the world’s earliest—are a drag on China’s economy and the government’s ability to function effectively.
Those rules might have made sense in a China where life expectancies and employment opportunities were short. In 1978, China enacted laws requiring men in any field to retire at 60 and women to retire at 55 if they were public servants, or 50 if they were engaged in blue-collar labour. At the time, more than 80% of China’s population was focused on agriculture and life expectancy was a few months shy of 66 years.
The inspiration was largely pragmatic. Forcing workers into retirement opened up opportunities for young and ambitious Chinese who might otherwise be idle. Meanwhile, China’s economy and governance benefited from young minds with fresh ideas and youthful bodies capable of doing physical labour. Short life expectancies ensured that China’s pension taxes were more than sufficient to meet the country’s obligations.
Today’s economy is quite different. Most workers live in cities, doing jobs that don’t involve back-breaking labour, and they are living longer. At the same time, China’s labour pool has begun to shrink: As of 2015, each Chinese pensioner was supported by fewer than three workers; in some provinces, the ratio is 1.5 workers per retiree. As China ages—and it’s one of the fastest-aging countries in the world—those ratios will become smaller and more expensive. One estimate says China’s pension shortfall could reach $190 billion by 2019.
The requirement that women retire five to 10 years earlier than men is particularly discriminatory. In recent years, it’s become a key factor contributing to China’s persistent gender pay gap. It’s also one among many reasons that female labour participation rates in China have declined for several years, depriving employers of some of their most skilled and experienced workers.
The consequences of early retirement on Chinese governance are just as severe. In China, power derives from complex patronage networks that don’t simply collapse when an official is forced into retirement. In many cases, those officials gain even more power once out of office, when they’re no longer subject to official responsibilities and oversight. This can have disruptive consequences. Former president Jiang Zemin, who stepped down as China’s top leader in 2002, has continued to exert a significant and—depending upon how he’s viewed—disruptive influence upon Chinese politics for two decades. In 2015, China’s top Communist Party newspaper even ran an editorial warning high-ranking retired officials not to emulate such figures.
But the problem’s most corrupting manifestation may arise lower down the hierarchy, where bureaucrats forced to retire often slide into quasi-public trade association jobs or private-sector positions, from which they can influence regulators via their still-intact patronage networks. Unsurprisingly, Xi’s corruption crackdown has aggressively targeted retired as well as serving officials.
Raising or eliminating the mandatory retirement age won’t solve all of these problems, of course. Cadres determined to abuse power will still do so. Within the system, though, especially after Xi’s anti-corruption crackdown, they can be monitored more closely. Likewise, China’s pay gap won’t vanish if men and women are allowed to retire at the same age. But at least employers will have one fewer reason to perpetuate it. And expanding the pool of workers is the only way to help address China’s looming pension shortfall.
Recent efforts to revise retirement limits have faltered because of a lack of political will in Beijing. Now that Xi has achieved more power than any Chinese leader in decades, here’s an opportunity to use it.livemint